Facebook IPO to be watched closely by social media firms

With Facebook expected to file its plans today for its initial public offering, industry and financial analysts say it could be one of the biggest IPOs in U.S. history.

And that could be a bellwether for the entire social networking world, bringing in more interest and money for other big Internet players like Twitter.

“What’s not to ‘like’ about the Facebook IPO?” asked Kathleen Smith, principal of IPO investment adviser Renaissance Capital. “The social networking king is an advertiser’s dream, accessing the intimate social interactions of one in every 10 people in the world… We are expecting 2012 to be a year of recovery for the IPO market led by the Facebook IPO.”

While many in the tech and financial industries have been sitting on the edge of their seats in anticipation of the SEC filing, the Wall Street Journal’s All Things D reported that Facebook may wait to file until after market close today. That is if they end up filing today at all.

Facebook, the largest social network in the world with an estimated 800 million members, is largely expected to file papers today, or at least this week, with the U.S. Securities and Exchange Commission, and then to launch its IPO in four to five months.

Many are waiting expectantly to see how well Facebook’s IPO will performs, as it’s being seen as a defining moment for the financial viability of the social networking sector.

With an estimated valuation of $100 billion, the IPO is expected to seek between $5 billion and $10 billion at the start.

However, Facebook is no average Internet company. The social network grew quickly, changing the way people around the world communicate, get their news and share information ranging from party photos and health news to favourite videos.

However, the network also has gotten more serious. Instead of being a place where users post status updates about their favourite sandwich and how long they worked out at the gym, Facebook also has become a place for politicians to reach out to potential voters and volunteers. It’s also a place where users go to share their feelings about major events, like the death of Apple founder Steve Jobs and the killing of terrorist Osama Bin Laden.

Facebook also amassed enough clout to take on Google in a high-powered duel for advertising dollars.

While Google has been the dominant player in the Internet world, Facebook has mounted an impressive challenge. And that battle would be out of reach for most companies.

“What is exciting about this is that this is going to be one of the largest IPOs in history,” said Mark Siegel, a managing director at Menlo Ventures LLC. “In terms of how we feel about social networks, it’s incredible news. This is great news for Twitter and Tumbler.”

Siegel added that the excitement over Facebook’s IPO is an indication that social networks are changing entertainment and advertising.

“They’re also changing us culturally in terms of how we interact with other people and how we feel about privacy,” he said. “It’s sort of this bellwether for social media. It will tell us a lot about what the demand is for social networks … [Twitter CEO] Dick Costolo is paying close attention to Facebook’s IPO.”

Rob Enderle, an analyst with the Enderle Group, noted that a successful Facebook IPO could immediately start driving more money toward social media. While he doesn’t anticipate another dot-com bubble arising, it could lead to an influx of cash to a lot of companies.

“It certainly could either drive more money into the segment if it is successful or pull money out if it isn’t,” Enderle said. “It will showcase just how rabid investors still are for this property. If Facebook goes big, its example should push funding into the segment. If it doesn’t, it will simply tell us that investors have moved on.”

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon’s RSS feed. Her e-mail address is [email protected].

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